Private equity (PE) and venture capital (VC) investments in India showed a significant growth of 60% in the July-September quarter, reaching a total of USD 13.6 billion. This data comes from the latest EY-IVCA monthly PE/VC roundup report. The report reveals that during this quarter, there were 209 deals, which is 60% higher compared to the same quarter in 2022.
Although the deal value in the July-September quarter was 5% lower than the previous April-June quarter, the number of deals was 18% lower compared to the previous year. This decline in deal volume was offset an 88% increase in pure-pay PE/VC investments, with 31 large deals worth USD 10.7 billion in the third quarter of 2023, compared to 15 large deals worth USD 4.8 billion in 2022.
Vivek Soni, Partner and National Leader of Private Equity Services at EY India, stated, “A pickup in pure-pay PE/VC investments of around 88% bolstered the growth in total PE/VC investments in 3Q2023, which recorded 31 large deals aggregating USD 10.7 billion compared to 15 large deals worth USD 4.8 billion in 3Q2022.”
According to the report, the life sciences sector has been a major attractor of PE/VC investments since 2018, with a total of USD 22.1 billion invested. This investment has been almost equally divided between pharmaceutical and healthcare. While the early years saw more growth in pharmaceutical investments, the post-pandemic period has seen a shift towards healthcare investments.
In terms of investment types, growth investments were the highest in the third quarter of 2023, reaching USD 4.5 billion, followed buyouts at USD 3.5 billion. The top sector during this quarter was infrastructure, with USD 3.9 billion invested, mainly in the renewable energy sector.
Soni also commented on the global macroeconomic situation, stating, “The Indian macro, while showing strong signals in terms of new highs in Index of Industrial production, GST collections, advance tax collections, and heightened consumer confidence as we get into the festive season, is increasingly being counter-weighted a deteriorating global macro, driven largely recessionary fears in the US and Europe.” He also highlighted the potential impact of sustained spikes in crude oil prices on inflation worldwide and the Indian economy.
The startup sector in India continues to struggle, with investments in startups being at a seven-year low. However, this doesn’t mean that PE/VC funds are inactive, as secondary deals have reached an all-time high of USD 5.2 billion. Additionally, PIPE (Private Investment in Public Equity) investments have also reached an all-time high of USD 7.5 billion. The positive performance of equity markets has contributed to the revival of the PE-backed IPO market and improved investment sentiment.
Looking ahead, Soni expressed hope that Indian PE/VC investments in 2023 will surpass the levels seen in 2022, considering the strong deal pipeline. He acknowledged the uncertainties in the global macroeconomic environment but remained optimistic.
In terms of exits, the third quarter of 2023 recorded USD 8.6 billion across 85 deals. Exits showed growth across all deal segments, with IPOs experiencing the highest growth year-on-year, followed secondary and strategic exits.
Overall, the PE/VC investment landscape in India is experiencing growth, despite challenges posed the global macroeconomic situation and the struggling startup sector. The future outlook remains positive, with hopes of surpassing previous investment levels in the coming year.